Saturday, May 17, 2014

All the details are set regarding the auction of Interstate General Media [IGM], the parent company of The Philadelphia Inquirer, Philadelphia Daily News and philly.com.

The "English-style auction" will begin at 9:30 a.m. May 27 at the law offices of Dechert LLP, at 2929 Arch Street in Philadelphia, according to documents filed in Delaware Chancery Court.

Trustee William B. Chandler III, a former chancellor of the Delaware Chancery Court, will officiate. The two warring ownership groups will be seated in separate rooms so that "each Group can consult with each other regarding bidding outside of the presence of the other Group."

The first bid will be made by General American Holdings Group, the majority ownership faction that includes owners George E. Norcross III, William P. Hankowsky, and Joseph E. Buckelew. Norcross has previously told the chancery court that the opening bid will be $77 million, an amount subsequently agreed to by the court. Then, the Intertrust Group comprised of minority owners Lewis Katz and H.F. "Gerry" Lenfest will have exactly 10 minutes to submit another incremental bid in writing that must be "exactly $1,000,000 higher than the prior bid."

It could all be over in 10 minutes if Katz and Lenfest don't bid $78 million. According to court documents, the bidding concludes when "either group fails to submit an Incremental Bid within the ten-minute time limit."

The only remaining question is whether the media will be allowed to sit in on the auction and report the results. Amazingly, the Katz-Lenfest faction wants the auction closed; they don't even want the amount of the winning bid to be divulged, according to a letter filed late Friday in Delaware Chancery Court by a lawyer for the General American group.

In the letter, the Norcross faction asks for "an open and transparent process."

In a letter filed late Friday night, P. Clarkson Collins, the Delaware counsel for General American Group wrote Vice Chancellor Donald E. Parsons Jr., stating that "the parties have agreed on all issues but one, that is public access to and disclosure of the auction process."

"The sole issue upon which the parties cannot agree is public access to and disclosure of the auction process, including without limitation access by the Newspaper Guild and media access to the bidding process, and the disclosure of the prevailing bid and the purchase price," Clarkson wrote Parsons.

"In short, the General American Group seeks an open and transparent process with media access to the observation and disclosure of the auction process and ultimate result and the Intertrust Group seeks a private process by the trustee conducting a private auction with only the identification of the winner being made public."

"Despite the best efforts of the parties, agreement simply could not be reached on this sole issue," Clarkson wrote.

In a footnote, Clarkson wrote that the respective parties' positions are each consistent with the prior testimony in Chancery Court of three principal owners: Norcross, Katz and Lenfest.

Bill Ross, the executive director of the Newspaper Guild of Greater Philadelphia. called the proposal to close the auction "mind-boggling."

"I think its hypocritical to want to block the press and reporters from attending this auction that's basically been public since the first filing," Ross said. [The legal slugfest between the rival factions of owners began last October, with the firing of Inquirer editor Bill Marimow, who was subsequently ordered reinstated by a judge.] A lawyer for the Guild sent a letter today to the Delaware court seeking to open the auction.

"I'm hoping that the judge will agree with our opinion that we and our members be allowed to attend the auction," Ross said. After an open battle in court, with plenty of leaked emails along the way, "Why would they take this position that no one should attend and that the results shouldn't be made open to the press," Ross said. "Again, it's mind-boggling."

"This process should be transparent and open because it effects many of our members' lives," Ross said. "We have close to 500 members who have made concession after concession. Clearly they want the results to be known."

In the letter to Vice Chancellor Parsons, Sean M. Brennecke, a lawyer for the Guild, argues that "since the legal proceeding for the dissolution of IGM was a public process, the final result of that dissolution proceeding, namely, the auction of IGM's assets, should be public too."

Brennecke, however, writes that even if Parsons decides to close the auction, the Guild should be allowed to be there. The Guild is a party to the legal proceedings in Delaware, and has already signed a confidentiality stipulation, Brennecke writes. "Thus, if any part of the auction process is to be confidential, the Guild would be bound by that determination."

In a proposed order dissolving IGM filed in Delaware Chancery Court on behalf of Intertrust Group, the proposed order states "the conduct of the Auction (including without limitation the value of the Incremental bids submitted, the Prevailing Bid, and the Purchase Price) shall be confidential. No Group or any of its principals, members, or affiliates, or any other person participating in the auction, shall disclose any of the foregoing information to the public or to any third party."

The Inquirer's reporting on the subject of whether its own auction would be open or private has been a curiosity.

Under the headline, "Auction of Inquirer parent set for May 27," an initial story by David Sell stated, "Both sides have agreed to all terms, except whether the public will be invited to watch, lawyer Richard A. Sprague said Friday."

Sprague represents Katz and Lenfest.

A second version of the same story changed that sentence to read: "Sprague declined comment on his preference for media access."

A third version of the same story posted online now states, "The only unresolved issue is who will be allowed to watch the bidding, Sprague said."

In the Inky newsroom where Katz partisans reign, it sure looks like the paper is trying to dance around the embarrassing fact that Katz wants to keep the media out of the auction.

Katz has certainly not been shy of late about being in the limelight. A front-page Inquirer story Friday trumpeted the news that the medical school at Temple University was going to be named after Katz, after he pledged $25 million to the university.

"I'm so honored," Katz told the Inquirer in an interview.

Both Sprague and a publicist for Katz did not respond to a request for comment.